20140822Decision Memo.pdf

DECISION MEMORANDUM - 1 -
DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL

FROM: KRISTINE SASSER
DEPUTY ATTORNEY GENERAL

DATE: AUGUST 22, 2014

SUBJECT: JOINT PETITION OF AVISTA CORPORATION AND KOOTENAI
ELECTRIC COOPERATIVE FOR APPROVAL OF ITS AS-AVAILABLE
POWER PURCHASE AGREEMENT, CASE NO. AVU-E-14-09

On August 15, 2014, Avista Corporation (“Avista”) and Kootenai Electric
Cooperative, Inc. (“Kootenai”) jointly petitioned the Commission for an Order approving a
Power Purchase Agreement between Kootenai and Avista ("Agreement") with a requested
effective date of August 15, 2014. Kootenai owns and operates a landfill gas electric power
generating facility located at the Kootenai County Solid Waste Facility near Bellgrove, Idaho
(“Facility”). The Facility is capable of generating up to approximately 3.2 megawatts of energy.
THE ORIGINAL AGREEMENT
Kootenai is under contract to sell the output of its Facility to Idaho Power Company
pursuant to an Oregon PURPA Standard Energy Sales Agreement. However, Kootenai has
claimed a force majeure event because the Facility is unable to deliver its output to Idaho Power
due to a transmission line outage caused by a wildfire. Idaho Power has accepted Kootenai’s
claim of force majeure and has consented to Kootenai temporarily selling its output to Avista.
Pursuant to the terms of its Agreement with Avista, Kootenai will generate and
deliver the net output of its Facility to Avista’s electric system on an as-available basis from
August 15, 2014 through August 24, 2014. Avista will purchase Kootenai’s output (up to a
maximum of l0 aMW) pursuant to Schedule 62 of its Idaho tariff at the lesser of (i) 85 percent
(85%) of the Powerdex hourly Mid-Columbia index, or (ii) the applicable rate based upon the
DECISION MEMORANDUM - 2 -
on-peak or off-peak avoided cost rates for non-fueled projects smaller than 10 average
megawatts – non-levelized in effect on the effective date (“avoided cost rates”).
THE FIRST AMENDMENT TO THE AGREEMENT
After execution of its Agreement with Avista, Kootenai became aware of an updated
transmission line outage notice that will result in an inability to deliver and sell to Idaho Power
until at least August 31, 2014. Due to the extended outage, Idaho Power has consented to
Kootenai selling its output to Avista through August 31, 2014. Consequently, Avista and
Kootenai executed the First Amendment to the Agreement which extends the term through
August 31, 2014. All other terms of the Agreement remain the same.
Avista and Kootenai jointly request that the Commission issue an Order (i) accepting
the Agreement, without change or condition, with an effective date of August 15, 2014, (ii)
accepting the First Amendment to the Agreement, without change or condition, with an effective
date of August 21, 2014, and (iii) declaring that all payments made by Avista for purchases of
energy under the Agreement be allowed as prudently incurred expenses for ratemaking purposes.
STAFF RECOMMENDATION
The original Joint Petition proposed sales for the period August 15 through August
24, 2014. On August 21 the Petitioners amended the Agreement to extend to August 31, 2014,
due to an extension of the transmission outage. Staff believes that the incurred expenses
associated with purchases of energy under the original and amended Agreement are prudent and
recommends that this Petition be approved by the Commission. Staff further recommends that
the Commission declare all payments made by Avista for purchases of energy under the
Agreement and Amendment be allowed as prudently incurred expenses for ratemaking purposes.
The rates contained in the Agreement are consistent with non-firm energy rates under
Avista’s Schedule 62. Although the extremely short duration of the Agreement—approximately
two weeks—is unusual, as is the fact that deliveries of power have already commenced, Staff
believes this is reasonable based on the exigent circumstances caused by the transmission outage
preventing delivery by Kootenai to Idaho Power.
Staff recommends approval without further process or procedure.

DECISION MEMORANDUM - 3 -
COMMISSION DECISION
Does the Commission wish to approve the Agreement, including the Amendment
extending the contract until August 31, 2014, between Avista and Kootenai without further
process or procedure?

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